CIBC Capital Markets economists expect the pair to USD/MXN extend its fall in the coming months.
Long MXN positions appear oversized by several indicators
Although the long MXN positions appear oversized by a number of indicators, we are lowering our forecasts for the USD/MXN in the third and fourth quarters to 17.50 and 18.00, respectively.
This reflects the continued preference for the MXN amid an environment of rate cuts across the region in the near term, but recognizes the large upside risk should further divergence in the monetary policy path materialize from the Fed and Banxico.
We highlight that we expect another 25bp rate hike (versus the 5bp discounted by the market) by the Fed in September, while we see risks of a quick dovish shift by Banxico in the fourth quarter at as inflation expectations fall and push the ex ante real rate towards 7.0% (360 bp above the upper band of the neutral real rate range estimated by Banxico).
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
